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Question: Discuss whether inflation is more likely to be caused by domestic or international influences. (12 marks)

Answer: Among the causes of inflation are monetarist theory of inflation ,cost-push inflation and demand-pull inflation .
Monetarist theory of inflation relates inflation to hoe fast the money supply grows or shrinks .According to the well-known economist Milton Friedman ,inflation is always and everywhere a monetary phenomenon .Inflation is said to occur if the rate of growth of the money supply is greater than the increase in the level of output in the economy ,so forcing up prices .This can be caused by domestic influences when there is reckless printing of money .This can happen when the government seeks to get out of debt and finance their own spending by simply printing more money ,resulting an increase in money supply and causing inflation .Inflation can also be caused by loose terms of deferred payment or easy credit .When loans are approved easily ,the money circulated in the economy ...(short extract)

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  • Subject: Economics
  • Course: Economics
  • Level: A-Level
  • Year: Not applicable
  • Mark: 100%
  • Words: 547
  • Date submitted: November 20, 2013
  • Date written: Not available
  • References: No
  • Document type: Essay*
  • Essay ID: 5205

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